Is Noodles & Co (NDLS) the Next Success Story?

Similarity #2: Super growth sectors

Investors aren’t salivating for nothing. They want growth, and they want it now. All three companies operate in the extremely high growth sector of casual fast food, which is growing faster than the overall industry. According to research firm Technomic, in Noodle’s S1-Filing, the segment saw an 8.4% increase in revenues by 2011, totaling $21.5 billion in the whole of the U.S. And it shows. Currently, Chipotle is calling for opening 165-180 locations in fiscal 2013. In the first quarter, Chipotle opened 48 new restaurants. In the first quarter, revenue grew 13.4% to $726.8 million. Net income increased 22.2% to $76.6 million. That’s a remarkable growth. In 2012, Noodles & Co (NASDAQ:NDLS) alone opened 45 new outlets and it expects that 50 new Noodles & Co. restaurants will open this year. And the restaurants that are open are reporting healthy same-store growth: 4.8 percent in 2011, and 5.4 percent in 2012.

Dunkin’ does have a bit of a problem on that front. Its core product happens to be in the sugary dessert category. This specific sector is currently being heavily targeted by regulators and various health organizations alike. But the company compensates for that shortfall very elegantly by introducing high-margin consumer products like coffee, tea, and beverages. They more than make up for this hurdle.

The Fool looks back…and ahead

Whether Noodles & Co (NASDAQ:NDLS) will be able to replicate the success of Dunkin’ and Chipotle still remains to be seen. But it’s definitely set on the right track. With seasoned management, a grooming private equity firm, and a sector flush with growth, Noodles seems like a dish full of opportunity.

The article Is Noodles & Company the Next Success Story? originally appeared on Fool.com and is written by Shmulik Karpf.

Shmulik Karpf has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill. The Motley Fool owns shares of Chipotle Mexican Grill. Shmulik is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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